Employment Growth Slows As Jobless Benefits Shrink

Aaron Moore completes a job application at a Los Angeles career fair on Thursday. Job growth has slowed sharply since the winter, the government said Friday.

Kevork Djansezian
/ Getty Images

Originally published on June 1, 2012 6:14 pm

May's higher unemployment rate and meager job creation couldn't have come at a worse time for people like Julia Gray. A Chicago-based writer and editor with a master's degree, Gray said she has been unemployed for 17 months. "The media world in Chicago is dead and deader," she said.

"I was collecting unemployment benefits for a while," she said. "It helped a great deal — it was incredibly important."

But now her benefits have run out, and her employment search goes on.

The Labor Department said Friday that the unemployment rate rose slightly to 8.2 percent, leaving 12.7 million Americans out of work. That unwelcome news comes just as federal support for long-term unemployment benefits is starting to shrink.

The number of workers who have gone without paychecks for more than six months jumped to 5.4 million in May, up from 5.1 million the previous month. The increase in long-term unemployment is tough news for those who are now learning their unemployment benefits are expiring this month under rules laid out earlier this year by Congress.

"The final 13 to 20 weeks of jobless insurance that workers in high-unemployment states have been relying on is now being stripped away," said Christine Owens, executive director of the National Employment Law Project, a group that advocates for low-wage workers.

"These cuts are coming faster than the economy is improving," Owens said in a written statement.

Job Creation Slows

In its May jobs report, the Labor Department said employers added just 69,000jobs, down from April's downwardly revised 77,000 net new jobs. This spring's job-creation pace was far below the average of 200,000 paychecks added each month during the winter, and well below the level needed to drive down the unemployment rate.

Many conservatives say scaling back extended federal benefits will spur the long-term unemployed to search harder for new jobs. Today's unemployment rate, while still painfully high, is far below the 9.9 percent level that prevailed when Congress first approved the emergency benefits extension in 2009.

At this point, the argument goes, the labor market has improved enough to create opportunities for people who are willing to make necessary changes, such as moving to another location, accepting lower wages or learning new skills. "Unemployment insurance makes unemployment last longer," Casey Mulligan, a professor of economics at the University of Chicago, concluded in a written assessment of the impact of extended benefits.

Gray, the Chicago writer, disagrees with experts who say unemployment benefits discourage job searches. "I've sent out close to 300 resumes, have had a few handfuls of interviews [and] been to countless networking events," she said. "Things are still so bad."

Benefit Cuts Vary By State

The coming reductions in unemployment benefits will vary from state to state and from one individual to the next, depending on when they lost their jobs. Here's what's happening and why:

In general, the responsibility for providing workers with unemployment benefits lies with the states. The basic program typically provides laid-off workers with up to 26 weeks of financial support, replacing about half of their previous weekly wages. There are certain federal requirements, but for the most part, the states set the rules and carry the costs.

But when the Great Recession crushed the job market in 2008 and 2009, Congress agreed to provide additional federal funds to help states extend benefits, in some cases up to 99 weeks. When the authorization for federal unemployment benefits was set to expire in February 2012, Congress reauthorized the program.

New Hurdles For Aid

It wasn't, however, a simple extension. Instead, Congress introduced new hurdles for getting the aid. For one thing, states now have unemployment-rate thresholds that dictate how many weeks of additional funds they can get. So, for example, Californians are getting hit with a reduction in benefits because, despite a jobless rate of nearly 11 percent, unemployment is not worse than it was three years ago.

Today, only three states — Nevada, New Jersey and Rhode Island — are still providing 99 weeks of help to the long-term unemployed. Starting in September, the maximum number of weeks of benefits will fall to 73 — even in these highest unemployment states.

Congress also imposed new job-searching requirements on those unemployed workers who had exhausted their regular state benefits.

The National Employment Law Project estimates that by the end of the first half of 2012, nearly half a million of the longest-unemployed workers will have been abruptly cut off from the federal unemployment benefits.

And it's not just the federal help that is shrinking. Some states are making it harder for people to qualify for the first few months of benefits. For example, in Florida, the rules have been tightened so much that more than half of all applicants are being turned away.